"The most significant threat to our national security is our debt," Admiral Michael Mullen, Chairman, Joint Chiefs of Staff, August 27,2010


Thursday, August 26, 2010

Is Deficit Spending the Problem?

Yes, it’s a problem. No, it’s not the real problem. The real problem is a lack of primary focus on what matters. What matters are fundamentals.  Not focusing on what matters results from not understanding what really matters and a constant distraction by people with megaphones, columns, blogs and other vested media and commercial pecuniary interests who promote misplaced and, in many cases, just erroneous analysis of and solutions to problems.

The American media, including the ranting right which lays claim to a more balanced agenda, just simply cannot bring themselves to focus on basic, fundamental issues. For reasons that TheFundamentals doesn’t grasp, they prefer to focus on a partisan agenda and occupy valuable and wasting time on topics of no import. It appears that they believe that this programming attracts more viewers than a worthwhile focus on the real problems in our country.  They are more interested in lining their pockets than informing their audience.

If you believe that deficit spending is the best way to counter a drop in consumer demand even in the face of massive preceding deficits, then you are not grasping the problem. Many problems manifest themselves in symptoms. Symptoms are not the problem; they are the indicators of a real problem – something systemic or something basic or something fundamental. Stimulus spending cannot solve a fundamental problem. And, after years of stimulus spending, it just aggravates the basic problem. It actually feeds the problem. It actually makes the problem worse.

What creates consumer demand, you ask?  People working in wealth creating jobs who are confident about their future.  The most basic essential of a thriving, growing economy is the ability to create wealth. This is the fundamental; this is the foundation; this is the essential that must be grasped or all else is lost. America has lost focus on this essential.

If you can grasp that wealth creation is the most basic essential of a thriving, growing economy then you can move to the second most essential component of growth and that is the promotion of competition.

Let us just stop for a moment and ponder these two essentials. A growing economy is based on wealth creation and wealth creation derives from several essential activities (see: TheFundamentals, February 4 and July 6, 2009). In order for a growing economy to survive in a larger environment; a community of other growing, thriving economies; it must promote competition. Not be neutral on the topic of competition and most certainly not be negative. If you think competition will come naturally you are wrong. It will not. There are too many forces that will seek protection and, no, they do not seek protection by asking directly for protection in most cases. They seek protection under the guise of lofty goals and betterment. Lofty goals have become a part of America's economic mythology.  Betterment is selfishly directed.  It betters those who seek protection.

America is no longer an economic growth machine. It relies on mythology about its past accomplishments and blunders around the globe with its confused and short sighted foreign, military and trade policies. But back home it has chosen protection and favoritism of special interests over competition. And that folks is not a symptom; it is the problem. It is the problem that is known to all but those who should and can do something about it.

What will get our focus back on wealth creation and competition? We don’t know. We just don’t know. The corrective actions that the marketplace forces on us are now being countered with activities (deficits and debt; stimulus and bailouts) that build a greater problem and, the obvious need for an even greater correction in the future. Our competitors know that we are on a path of self destruction. They will speak among themselves about it but they will not force or encourage corrective action because they know it will ultimately arrive and they do not want their fingerprints on it.   They know that they will be the beneficiaries of its arrival.

There are only a few paths to correct America’s real problem. Eliminate the years of laws, rules, taxes, spending, regulations, bureaucracies and policies that either burden wealth creation or suppress competition. When that job is done, get about promoting rules and policies that promote wealth creation and competition. Protected groups, special interests and millions of their beneficiaries will holler (remember the line from Summertime Blues, “I’m gonna raise a fuss, I’m gonna raise a holler”) and complain and spread fear of doom. When that occurs and their fuss occupies the media; then, and only then, will you know that help is on the way. That the problem; the real problem; not the symptom, is being corrected.

Let’s just repeat this simple truism. You will know that the real problem is being corrected when the forces that burden wealth creation and suppress competition are occupying regularly and consistently the attention and focus of the media, regardless of political leaning. Until that happens the problem is just getting worse.

Tuesday, August 24, 2010

Lying to the FBI

The purpose of this essay is to educate citizens about the issues that arise as a consequence of 18 U.S.C. Section 1001.

The apparent contradiction between the USConstitution and the reality of numerous convictions based solely on a “lying to the FBI” charge under 18 U.S.C. Section 1001 brings us to address this situation and to encourage further review and discussion of its impact on good citizens. By the way, it’s not just the FBI that can hold you accountable for your misstatements, real or imagined. It’s most any federal person; even the clerk at the social security office. Think about that. Just one more reason to not want to have anything to do with the public servants whose pay/benefits/pensions you fund!

There are just so many situations now where a citizen can be charged with lying to the federal government. It is almost impossible to live a normal life – be an employee; own a company; file tax returns; apply for social security or Medicare; engage in almost routine activities and not encounter a form; a question; an oath or some form of statement or declaration that opens a citizen up to the charge of lying to the FBI or some other government agency/bureaucracy or person.

And, if you think it will never happen to you, ask Martha Stewart, Libby, the Scooter or, most recently, a brilliant public servant as Rod Blagojevich. Even when you have committed no crime, you can be charged with the crime of lying to the FBI if they deem a statement from you to be untruthful. And guess who most jurors believe when a citizen is charged with this offense? And, this situation can occur with the feds presenting nothing but lies in their confrontation and questioning with you. Very strange system you might think. They can lie to you with no consequence and you go to jail for up to five years for lying to them. Very strange indeed.

So, you might ask, why would you lie to the FBI? You have no reason to lie to the FBI. You’re a good guy/gal/person. Your mother likes you; your spouse still speaks to you; dogs don’t snarl as you go by; little birdies fly around you; you even let some creep into the open lane after he bypasses a 1.5 mile line of cars who moved over when they saw the merge left sign. You tell the truth most all the time. So let it go. Tell them what they want to hear. Oh, if only life were so simple.

Let’s take a look at the big law – the one we always quote when we think the government is overreaching and mistreating us. What does it say about self incrimination? What does it say about lying to the FBI?

USConstitution, Amendment 5: “No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.”

Compelled … to be a witness against himself. So what does that mean?

Check out this video entitled, “Don’t talk to the police.” http://video.google.com/videoplay?docid=-4097602514885833865#

Now, in case you want to hear the other side of the issue, which if you pay attention is really a compelling argument for not talking to the police, just click on here: http://video.google.com/videoplay?docid=-4097602514885833865#docid=6014022229458915912

So, what’s a body to do? Well, we sure can’t give legal advice and we darn well should not be giving legal advice in a country with more lawyers than any other place in the known galaxy. Let’s read what a lawyer says about talking to the police and how you may wish to handle yourself if you ever find yourself being questioned about darn near anything. Just click on: http://library.findlaw.com/2004/May/11/147945.html

So, the lawyer says you should say, “I’d like to speak with my lawyer.” Self serving? Perhaps. Good advice? Well, we’re inclined to give it some thought; just in case.

In closing, please share this posting with anyone you know who may, inadvertently, accidentally, never with malice, but nevertheless, find themselves in a questioning moment with someone from the government who is there to help.

Last, the law that creates the jeopardy for lying to a federal personage is known as 18 U.S.C. Section 1001. You can read it at: http://codes.lp.findlaw.com/uscode/18/I/47/1001   It is not easy reading.  It is written by lawyers to confuse citizens so that they will need to hire lawyers to tell them what the laws says and what they did or are accused of doing.   Nice system, huh?

And finally.  There is really only one big set of rules.  The really big Fundamentals.  Most of know these guidelines as the Ten Commandments.   We know these rules because if we've one functioning brain cell remaining we know that we may well have to account for our behavior vis-à-vis these big rules and this accountability carries with it a rather profound and lasting consequence.  So, to the issue of lying and the big set of rules.  Here is the pertinent commandment:  "You shall not bear false witness against your neighbor."  Nothing about lying to the FBI mind you unless you are telling fibs about the guy/gal next door.  Then you have a much bigger concern than the feds.  So, we think it's best to tell the truth, mostly.  We think you had darn well better mind your p's and q's though when talking about your neighbors.  That's coming straight from the Big Guy/Gal.

Thursday, August 19, 2010

Reactions and Reactors

TheFundamentals tends to focus on matters of finance, economics and government fiscal and monetary policy. These topics are near and dear to us because of the 40+ years of real life experience we have had in such matters. When we move away from these topics and embrace other non financial and economic topics we do so as amateurs. We rely upon other voices; others with firsthand experience and others who have either studied the circumstances or have spent time with the principals to permit them an insight into these matters. Such is the case with Iran and its nuclear intentions.

Recently, two important voices have been heard on the matter of Iran and its nuclear activities.

First, we reference an insightful and informed article printed in the Atlantic Monthly by Jeffrey Goldberg entitled, “The Point of No Return.” It can be accessed by clicking on: http://www.theatlantic.com/magazine/archive/2010/09/the-point-of-no-return/8186/

It is not comforting reading. We do not know if the situation described has the currency that the author suggests. We don’t know what our government is doing directly and indirectly with our allies and the principals. We do think that an understanding of the personalities and the issues and the motivations is important and necessary if our readers wish to anticipate possible strategic and tactical considerations rather than react to them after the fact. So, we encourage you to read the article.

The second article also bears a certain currency of timing and consequence. We don’t know much about John Bolton. We don’t know him other than to see him on occasion on a talk show. We do think he knows of what he speaks. Here is the article from the Jerusalem Post - http://www.jpost.com/IranianThreat/News/Article.aspx?id=185060

We in the US of A know that there are growing groups of people in other countries and in our own land who wish us ill. We also know that they are immensely patient and not inclined toward the American concept of immediacy; now coupled with instant gratification and satisfaction. So when we see two informed individuals with knowledge, experience and some personal contacts tell us that something may be up and that something may involve an Israeli attack on Iran, we think, just to ourselves, “What the heck does that mean for us who are just trying to get along in the good old US of A?” After all, no one is calling us up and briefing us about these things.

If you were around in the 70’s you may recall gas lines and inflation and powerlessness. If not, just ask your Mom, Dad, older uncle or grandpa. Those of us who fall in one of those categories love to go on and on about how tough (and expensive) it was to get the tank filled and how goofy the grocery price increases were and how little confidence we had in our national government (no, we’re not talking about now; this was 30+ years ago.) So, what would be the impact of an Israeli attack on Iran? What would the impact be if the US of A either joined or condoned or supported such an attack? What does it mean that the Iranians are working with the Russians to bring their nuclear reactor closer to operation? What does this mean and what does the possibility of an attack on a nuclear reactor mean given that Israel has already bombed out two other nuclear reactors – Iraq (Osiraq) in1981 – Operation Opera and Syria in 2007 – Operation Orchad?

Well, we don’t know but we sure wouldn’t be making the book on the short end of the possibility of an Israeli attack on the Iranian reactor. We are not getting great input, analysis and strategy from CNN, PBS, ABC, Fox and NBC. What does it mean? Frankly, we think, they stay away from the topic because they would rather be politically correct and this topic is fraught with political correct minefields.

The US of A, our country is now a land of 310 million people. We no longer seem to be the growing, powerful economic player of the past. The times they are a changing. We are witnessing the development and strategic movements of others – developing nations; growing populations; strategic shifts in power and their balances. Our leaders are silent. They almost seem to be like parents of a noisy or disruptive child – focused on placating the youngster; anything to buy a few minutes of peace and quiet. Just let me get through and out of this and then things can hopefully be normal again.

It is not just fiscal promiscuity and deficits and debt and Muslim terrorists that should be on our mind. We are facing a real problem. We seem to be in the midst of a Mexican standoff. We just don’t see who can win this situation. We are just wondering, “Can we survive it?” We are just wondering, “What do we have to do to survive it?” The Israelis appear to be wondering the same.

Tuesday, August 17, 2010

Putting Government First

Our posting today is a link to Pat Buchanan's recent essay describing with fact and focus the horrible disconnect between the larger private, wealth producing portion of America with the bloated, piggish, smaller public wealth consuming portion of America.

You can read his comments at:  http://www.humanevents.com/article.php?id=38536

We encourage you to read this essay and share it with as many as possible. 

America does not need 22+ million wealth consumers in publically funded jobs enjoying, at the expense of the larger private wealth creating workforce, ridiculous levels of pay, benefits and retirement plans.  It most certainly does not need a misguided national government borrowing monies it does not have and will never create to fund this piggish behavior. 

Pat hits the issue dead on with his comments that the states are required to balance their budgets and their cutback efforts are needed to bring fiscal sanity to years of fiscal promiscuity.  All the national government has done is violate the US Constitution and imposed its pathetic pandering to public employee unions with no regard for the larger public good.  This act, on the part of the party in power, warrants their entire dispatch on November 2, 2010.    The national government has no business in law or precedent to over ride the sovereign acts of the states of the United States.

Please pass Pat's article to as many of your friends and associates as possible.

Thank you.

Friday, August 13, 2010

"America has created a monster"

Today’s title is a quotation from a recent article in the Financial Times addressing the situation that the Federal Reserve has created. Read the entire article at http://www.ft.com/cms/s/3/3035a2c6-a488-11df-abf7-00144feabdc0.html

This specific quote has to do with the support of the US residential mortgage market which, at best, is quite the gamble. The real gamble is much bigger than just the residential mortgage market. The big gamble, the real monster, is based on the misconceived steps that the fiscal part of government is engaged in; namely, massive deficit spending designed to support a systemically weakened economic growth machine without addressing the serious systemic impairments and burdens that have been placed on this machine over the past 30 years.

TheFundamentals is now completing its second full year of citing facts and figures to support a valid economic analysis of America’s decline vis a vis its developed and developing world competitors.

Our exports are declining compared with our competitors. Our exports per capita place us in the bottom of the top ten exporters. That is a simple fact. We are no longer a leader in exports and we must be if we wish a strong currency and we wish to pay for our massive appetite for imports.

A major burden in our economy is health care costs. Our per capita costs are double, and in some cases triple, that of our major competitors. We, at TheFundamentals, at our road shows and meeting presentations have been asked why this is so. We pay double and triple for the same results; the same outcome; the same consequences as measured by life expectancy as do our major competitor developed nations. Why is that? The components we’ve suggested are: too much litigation; too much lawyering; too much defensive medicine to avoid litigation and lawyering but there are many other possible components including a non competitive environment for the production and maintenance of doctors and nurses; the protection of a pharmaceutical industry that shuns competition and reasonable patent protection expiration and a disproportionate expenditure of resources on aged people at the end of their life spans. Further there is just too much waste on unions; on not for profit activities that are not productive and too much publically funded research with no objective measurement.

We, at TheFundamentals have also pointed out that the US has a much higher level of attorneys per capita than our major developed trading partners. We also lack the basic disciplines that other advanced countries impose on lawyers and litigation. Specifically we do not employ loser pays rules in litigation and we do not employ reasonable limits on non economic damages. These are reasonable limits that others routinely employ. This lack of discipline is a systemic problem.

Perhaps more than any other reason though is the burden on our economy of too many citizens not working in wealth creating jobs. Our labor department indicates a labor force of approximately 155 million Americans out of a total of 310 million. We know that 15 million of the 155 million are unemployed and we know that about 13 million of the 155 million are underemployed. We also know that about 22 million of the 155 million work for local, state and federal governments meaning they are not in wealth creating jobs. If you subtract these three segments you realize that 50 million of the labor force are not working; not working full time or are in wealth consuming job. That leaves about 105 million in wealth creating jobs to support the full population of 310 million. Now that is quite a burden.

Last, we must address the issue of business climate. Business climate is composed of many factors. Here are some:

• Labor costs
• Union issues
• Litigation issues
• Benefit and retirement costs
• Bureaucratic rules and regulations
• Taxation policies - local, state and federal
• Employee relation issues – training, absenteeism, turnover

If you want to know where business stands on the business climate issues listen to a business man; not a politician. What you hear will either astound you or depress you or both.

In closing this essay, TheFundamentals would like you to consider this simple fact. Over the last twenty years, the Federal Reserve oversaw, promoted and enabled the financing of the largest inflation bubble ever recorded in real estate valuations. It spiked the punch bowl constantly and ignored the patently obvious warning signs and then the danger signs. It was complicit with a congress and political leadership that ignored fundamental basic concepts and values of fiscal and personal responsibility.

We are witnessing the encore presentation of this irresponsible and promiscuous behavior. It is now cloaked in the Keynesian concepts of stimulus spending and job creation. Only temporary, fleeting benefits are being enjoyed for the simple avoidance of facing a period of rationalization and resource reallocation in the planned portion of the economy, or the government/public sector. We can pretend that this approach will work; it will not. We can pretend that we can avoid adjustment and sacrifice and frugality; we cannot. We can avoid the burdens we have placed on wealth creation and competition and hope they will be overcome; they will not.

This is the monster referred to in the above article. This is America’s Frankenstein.

Wednesday, August 11, 2010

Kumbayah

As we walked past the White House last night, we heard the melodic tones of the anthem of the left spreading across the lawn to capture our attention on Pennsylvania Avenue. The sounds were so blessed and peaceful that we paused to sway in the warmth of the evening…

…Someone’s laughing, Lord, kum ba ya…

Well, who could be the someone laughing? We don’t know. We have nary a clue about who could be laughing because we don’t even know what this song is about. But if we were pressed to answer that question and we could not get in touch with the silly fools who write this nonsense, we would guess, in no particular order, that the laughers would be:

• Al Qaida
• Muslamic terrorists
• Muslims
• The Chinese leaders
• The Russian leaders
• The Indian leaders
• SEIU, AFT, NEA and lawyers, US and state and local government employees and their fat can union leaders
• Gosh, just about anyone that we compete with; or who is slopping at the trough or who would celebrate with great glee as we self destruct.

Someone’s crying, Lord, kum ba ya…

Who may be crying?  Probably about fifty million four hundred thousand and forty eight of the youngsters of America and the unborn of same. They are the first generation of Americans who are being presented with an endless credit card receipt so that their parents and grandparents and great grand parents can live it up; pork it up; wheelchair it up; knee and hip replacement it up; Wal Mart it up; handicap parking place it up; early bird special it up and poke along in the left lane it up. Cripes, you don’t have to be an infant or youth to cry it up. All you have to have is a medium term memory.

But, in case you like lists, with specifics, here we go:

• Liberal media such as PBS, Newsweek, Time, ABC, NBC and CNN (they are gonzo in less than a decade)
• Retirees who are not on a defined benefit pension plan which means most everyone who worked in private competitive businesses which pay the taxes
• Almost anyone with a big student loan
• Almost anyone with a big mortgage loan
• Any minority youth living in any major city
• And majority youth living in any minor city or suburb

Someone’s praying Lord, kum ba ya…

Now this one is kinda fun. People pray for many things. Some people pray for a nice car; others for the demise of an enemy; others for an attractive mate; and some even pray for world peace or at least peace in their valley. We, at The Fundamentals, do not ask the Lord (well, not always) to do that which we mortals can do for ourselves. Instead we pray for things that we can’t do for ourselves; like bring a small shaft of light into the lives of the silly people who claim to be leaders. Well, that’s not entirely true, either. Sometimes we pray for them to coincidentally just happen to occupy the same geographical spot at the same time that the Hells Angels have chosen for this year’s fun outing. Or, if the logistics of that coincidence are too challenging for the Lord of this song, perhaps He/She could just arrange for them all to be in the vicinity of the next extraterrestrial arrival of cosmic rubble accumulation known as an asteroid. But, alas, those prayers don’t seem to garner the level of attention and result that we pray for. Oh, what’s a soul to do? Does this mean that we are supposed to deal with these situations ourselves? Does this mean that we can’t just pray for a good ending? Why can’t our prayers be answered when we encourage enlightenment on others?

Someone’s singing Lord, kum ba ya…

Here’s who singing (or at least whistling past the graveyard):

1. AFT
2. NEA
3. SEIU
4. AFL-CIO
5. All lawyers
6. Trial Lawyers particularly
7. Talk radio and talk TV silly people
8. The party out of power (POOP) and the Party in Power (PIP)

Someone's spending, Lord, kum ba ya
Yeah, baby.  Spend, baby spend.

Someone's borrowing, Lord, kum ba ya
Borrow, baby borrow

Someone's printing, Lord, kum ba ya
Print those greenbacks, baby.  Get 'em out there fast.

Oh Lord I need you…

Now this answer is: All of Us. But, tonight, it’s really many of the folks listed above, only they just haven't quite grasped what is coming their way.

Kumbayah, baby.

Thursday, August 5, 2010

Redemptive Politics

"Wherever politics tries to be redemptive, it is promising too much. Where it wishes to do the work of God, it becomes not divine, but demonic."
— Pope Benedict XVI

Pope Benedict, meet the founding Fathers.

The establishment clause of the first amendment of the constitution is all about government being redemptive; the pitfalls of government being redemptive and the unfortunate consequences of government being redemptive. So, what did we do in the last two generations? We embraced the politics of redemption. And now we are reaping that which we have sown.

Can government redeem the human condition? Can it establish a higher plane of life that will make the daily trials and tribulations of being a human being more tolerable; more connected to nature; more in line with the great unknown mysteries of existence and salvation?

The Marxists have tried it. Their disciples are still at it. There is very little substantative or tangible evidence that Marxism accomplishes its objectives but that reality seems to bear small influence on the attraction to the light of its message. The socialists sure like it. They still claim that public ownership of wealth creating activities is the only truly democratic way to produce and share the wealth in some equitable manner. But it always seems that the strongest voices for these pro bono publico systems are the ones who either cannot grasp the concept of competitiveness or have grasped it to such an extent that they move beyond the mere toil of meeting basic needs.

Here is the pertinent wording of our first amendment which seems to be pretty basic stuff, “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof…”

Now most religions have lots of rules and lots of processes and traditions and forms to fill out and learning sessions to attend and books of concepts to memorize. Some of them collect money with vigor and others with variations of volunteerism. Some use sugar to entice; some use fear and some go right to the bottom line – behave; pony up or go to he**.

When government moseyed over to this path, which it is inclined to do, it brings one powerful form of enticement. It brings subtle and violent power. It brings the power to confiscate; harass and ultimately to destroy the simple human needs for life, liberty, freedom, privacy and property. It can tax you to death; it can decide if you should be left alone or hounded unmercifully and, it can, literally put you to death. Think about that. Government can kill you and not incur any earthly consequence. It can take your property; it can take your freedom; it can take your life or that of your child or spouse or neighbor.

It can decide to pursue one set of values and reject another set of values. It can decide to help out one group of people and make another group pick up the tab. It can fund its activities with your money and give the money to those who join it and support it. Or it can just keep it for the benefit of those who are on the inside and say the heck with all others.

Are you beginning to get the idea of why the founders and the Pope said no state or government or politics of redemption? Are you beginning to get the idea of why one government’s redemptive promises may not be consistent with your redemptive preferences? Does it make sense to limit government to a small list of non redemptive tasks such as running the army or the courts or printing the currency (as long as it is economically based) or establishing tariffs and protecting the borders? Makes sense to TheFundamentals. Here is the list of activities that the founding fathers said are OK for the national government – go for it; these are your powers and these are your only powers. All other powers; all other everything belong to the states and the people.

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;

To borrow money on the credit of the United States;

To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes;

To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;

To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures;

To provide for the Punishment of counterfeiting the Securities and current Coin of the United States;

To establish Post Offices and Post Roads;

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

To constitute Tribunals inferior to the supreme Court;

To define and punish Piracies and Felonies committed on the high Seas, and Offenses against the Law of Nations;

To declare War, grant Letters of Marque and Reprisal, and make Rules concerning Captures on Land and Water;

To raise and support Armies, but no Appropriation of Money to that Use shall be for a longer Term than two Years;

To provide and maintain a Navy;

To make Rules for the Government and Regulation of the land and naval Forces;

To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions;

To provide for organizing, arming, and disciplining, the Militia, and for governing such Part of them as may be employed in the Service of the United States, reserving to the States respectively, the Appointment of the Officers, and the Authority of training the Militia according to the discipline prescribed by Congress;

To exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the acceptance of Congress, become the Seat of the Government of the United States, and to exercise like Authority over all Places purchased by the Consent of the Legislature of the State in which the Same shall be, for the Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful Buildings; And

To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.

So, back to Benedict XVI. Some call him Father. Some call him Holy Father. Founding Father also seems appropriate.

Tuesday, August 3, 2010

Summertime Blues

“I'm gonna raise a fuss, I'm gonna raise a holler”

Let’s see who’s raising a fuss and raising a holler:

1. Congressional Budget Office just issues their summertime essay entitled “Federal Debt and the Risk of a Fiscal Crisis.” It makes for good beach reading. Check it out at http://www.cbo.gov/doc.cfm?index=11659  Here are some highlights, so to speak (paranthetical comments added by TheFundamentals):

• …a growing level of federal debt would also increase the probability of a sudden fiscal crisis,
• during which investors would lose confidence in the government’s ability to manage its budget, (would lose?)
• and the government would thereby lose its ability to borrow at affordable rates.
• It is possible that interest rates would rise gradually as investors’ confidence declined,
• giving legislators advance warning of the worsening situation and sufficient time to make policy choices that could avert a crisis. (this comment is pretty rich)
• But as other countries’ experiences show, it is also possible that investors would lose confidence abruptly
• and interest rates on government debt would rise sharply.  (oops)
• The exact point at which such a crisis might occur for the United States is unknown… (ain't that the truth)

Now that the CBO has covered the ample layers of fat covering the federal bureaucratic gluteus maximus, it is time to leave Washington DC and its sultry warm environs and forget about such matters as record deficits and record debt. Or as the song suggest, “I'm gonna take two weeks, gonna have a fine vacation.” Two weeks? Oh well, the song was written in the 1950’s; back before there even was such a thing as federal employee unions.

2. The white house has convened the deficit and debt commission and they will report sometime after the elections. But they have already said, “ there aint no cure for the summertime blues.” Only the words they used were, “ Can’t tax our way out of it; can’t grow our way out of it. It’s a cancer.” Sounds like the song which said, “Well my mom and pop told me, "Son you gotta make some money.” You see, back in the 50’s the concept of “make some money” involved real work and real jobs in real wealth creating activities. The times they are a changing.

3. “Sometimes I wonder what I'm a gonna do…” Well, let’s see what the brilliant Ben Bernanke has to say about what he’s a gonna do. First let’s look back at what brilliant Ben had to say about rising housing costs a few years ago. October 27, 2005, testifying before a congress committee, brilliant Ben basically attributed the fast rise in house prices to "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households. We don’t make this stuff up. You can check it out for yourself at http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html  Aren’t you glad to know that the man who accurately recognized the nature of the housing bubble (that’s literary sarcasm) is now telling us to spend, baby spend and borrow, baby borrow but make sure you stop before something bad happens which if you keep spending and borrowing will happen. We hate to say it but having Ben follow the fool Greenspan is kinda like having Obama follow the fiscally promiscuous Bush .

So, what's a body to do? Well, here’s the CBO’s graphical display of public federal debt as a % of GDP. Mind you this is not the real debt but it is a deliberately reduced number so that the results don’t look as bad as they would if they showed you total debt including unfunded commitments:




"I'm gonna take my problem to the United Nations
Well I called my congressman and he said Quote:
"I'd like to help you son but you're too young to vote"

We don’t know about the United Nations but we do know that the truth in this line from the song is overwhelming. I’d like to help you son (and daughter) but you’re too young to vote. Aint that the truth. Our gift to our children.  Talk about inheriting a mess; more debt than ever owed by any country in history!

Have some fun and let Eddie Cochran take you back to the good ole days - http://www.youtube.com/watch?v=MeWC59FJqGc